Ugandan shilling eases after government debt yields decline

KAMPALA, May 21 (Reuters) - The Ugandan shilling UGX= lost ground after posting early morning gains on Wednesday, hit by dollar buying pressure from commercial banks as concerns that a decline in yields on government securities could lead to reduced inflows in future.

At 1004 GMT commercial banks quoted the currency of east Africa's third largest economy at 2,530/2,540, after gaining to an intraday day high of 2,525/2,535.

The shilling was however little changed from Tuesday's close of 2,532/2,542.

"After the bond auction results came in there was some fear that the drop in yields will make these papers unattractive," said Shahzad Kamaluddin, trader at Crane Bank.

"That triggered (dollar) buying pressure in the interbank."

The yields on Uganda's two and fifteen-year Treasury bonds both papers declined by more than 90 basis points at an auction on Wednesday. ID:nL6N0O724S

Traders say the recent downward trend in interest rates on government debt will likely depress demand from offshore investors, cutting off future dollar inflows and potentially weakening the shilling.

"I think the shilling might not move down (weaken) significantly because after all we don't have much demand from corporates," said a trader at a leading commercial bank.

"But I would think this trend will continue to be a concern in the short term."

UGX Spot Rate..... UGX=

Ugandan Shilling Money Guide.... UGX/1

Calculated Cross Rates.......... UGXX=

Deposits..................... UGXDEPO=

Deposits & Forwards............. UGXF=

Uganda Equities Guide....... UG/EQUITY

Uganda All Share Index........ .ALSIUG

Shilling background ..... UGX/BKGDINFO

Ugandan Debt Guide............ UG/DEBT

All Uganda Bonds............. 0#UGTSY=

Uganda T-Bills.............. 0#UGTSYS=